Are Immediate Annuities Capable of Providing the Right Solution?
By: Mike Anderson
Submitted: 2011-05-03 23:38:39 | Word Count: 533
Post retirement life becomes uncertain in the absence of the hefty paycheck that we were getting on a regular basis at the office. However, our day-to-day expenses more or less remain the same even after the retirement. In many instances, the expenses increase as our health starts to deteriorate when we get old. If we are fortunate enough then we get a pension from the employer's pension scheme. In such benefit retirement schemes, the employees constantly contribute a significant portion of their income to the pension fund. After retirement the pension amount is calculated on several factors like retirement age, salary before retirement, and many such factors. Employers nowadays are happy to offer 401(k) plan as contribution retirement.
However, an immediate annuity is lot different from a regular pension scheme. They are very popular with the financial advisors. When you decide to buy annuities, you have to be prepared to hand over a lump sum to the insurance company, financial institution, or a bank from where you are purchasing. The moment you do so and complete the usual formalities, you start receiving immediate checks. The checks continue to flow into your account till the last day of your life. And the payment continues till the end of the surviving spouse.
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The advantages of immediate annuity are plenty. Through this financial scheme you would be guaranteed of a lifetime payment. You can also decide to choose a definite number of annuity years for your convenience. This period can be of twenty years or twenty five years. Though the interest rates earned on your annuity would not be that high, but it offers a high value security which most other financial schemes fail to provide. The stock markets may fetch you higher interest rates, but with an annuity you do not stand to lose anything.
However, you need to be careful with an immediate annuity which has a long duration. The monthly payments to you might lose their purchasing power in the presence of inflation. The amount what you are receiving today might just prove to be too insignificant after a period of twenty five years. Under such circumstances, you can rely on variable annuities. Such an annuity can keep up pace with the inflation. However, such an annuity comes at a higher price, and the fee structure is also quite complex. It also involves a good degree of risk. If the market for any reason falls, it will show up on your monthly payments. So, in the bargain of getting a higher return value, you stand the chance of losing your security.
Therefore, a careful analysis is required on your part to decide on the best form of annuity. Before making a sizeable investment, it would be wise to consult with an expert financial advisor regarding the various types of annuity available in the market. These advisors will help you to take the right decision. You can also search online to know more about immediate annuity. So, wish you all the luck with your annuity!
